Case of the Month: Individual Principles Hit with $114.1 Million Verdict for Role in HDL Blood Test Fraud

Roughly three years ago at this time, mega-scandals were in the news featuring diagnostic giants like Millennium, Health Diagnostic Laboratory (HDL), Biodiagnostic Laboratory Service and the like. But now that the labs themselves have settled, the focus has shifted to the individuals and associated firms involved. Many of these spinoff lawsuits have also settled. And if the recent South Carolina ruling involving the former principles of HDL is any indication, the defendants who chose settlement over trial made a prudent decision.

The $114.1 Million Verdict
The case against HDL and its lab business associate Singulex, Inc. began as a qui tam whistleblower lawsuit alleging payments of kickbacks disguised as processing fees of $10 to $17 per test to physicians in exchange for orders of medically unnecessary blood tests; then, by billing Medicare and TRICARE for tests provided under the arrangement, the labs violated the False Claims Act (FCA). In April 2015, the case settled with HDL agreeing to pay $47 million and Singulex $1.5 million. Both labs also entered into Corporate Integrity Agreements with the government.

The current case also started as a whistleblower suit targeting HDL’s former CEO and a pair of individuals involved in marketing HDL and Singulex tests for their role in the scheme. The defendants decided to fight it out in court.

It turned out to be a bad move. After a two-week trial, the jury found all three jointly and severally liable for kickback and FCA violations. The numbers were staggering:

• 35,074: False claims by HDL the defendants were responsible for submitting to Medicare and TRICARE;
• $16,601,591: The value of those claims;
• 3,813: False claims by Singulex the two marketing defendants were responsible for submitting to Medicare and TRICARE;
• $467,953: The value of those claims.

The Bill
Having established liability, the court then had to determine the damage award. The formula:

Treble the damage amounts (something courts are allowed to do under the FCA)
+
Offset of settlement payments HDL and Singulex received for the claims
+
$63.8 million in damages the DOJ requested